Options on Sprott’s CEFs (U, PHYS, PSLV): Income and Risk Tools for Self-Directed Traders and Investors

The Montréal Exchange launched options on three Sprott closed-end funds (CEFs) in early September 2025: Sprott Physical Uranium Trust (SPUT) [option symbol: U; underlying TSX: U.UN], Sprott Physical Gold Trust (PHYS), and Sprott Physical Silver Trust (PSLV). All three contracts began trading on September 2, 2025, with standard equity option specifications, weekly expirations, and inclusion in the Penny Program (one-cent increments below $3; five-cent increments at $3 or more).

What's notable is that SPUT (U.UN) is the first physical uranium vehicle with exchange-traded options. This marks a significant development in a market that lacks active uranium futures contracts. SPUT options provide investors and hedgers with a new way to trade uranium or manage exposure through listed derivatives.

Understanding the CEF structure

A closed-end fund issues a fixed number of shares that trade intraday on an exchange and shares characteristics similar to those of stocks. Since shares are not continuously created or redeemed at net asset value (NAV), CEF market prices typically trade at a premium or discount to their underlying holdings' values—creating both risk and opportunity for traders and investors.

Sprott's commodity CEFs hold physical assets. The SPUT product contains uranium oxide (U₃O₈), PHYS holds gold bullion, and PSLV holds allocated silver bullion. As such, these products provide direct commodity exposure without the operational burden of storing metals or uranium, while still maintaining exchange liquidity.

Options on CEFs are useful to retail options traders

Income enhancement through covered calls

Investors holding PHYS or PSLV units can write out-of-the-money (OTM) covered calls, which add a recurring premium stream to total return. This is ideal in range-bound markets, where upside potential caps at the strike price if the options are assigned. Repeated premium collection can improve cost.

Risk mitigation (Protective puts)

A long PSLV or PHYS holder concerned with volatility can buy puts under the market, creating a floor on portfolio losses, but still keeping upside potential open. For commodity exposures prone to abrupt drawdowns, this "insurance policy" approach proves especially valuable.

Smart entry and exit

Investors eyeing SPUT at a discount to its NAV can sell cash-secured puts to enter at a target price while earning a premium. If assigned, the investor owns units at an effective discount. If already long into strength, a collar (i.e., sell a call and buy a put) can protect gains with minimal or no net premium outlay.

Exposure to thin futures

For uranium investors, SPUT options offer a practical derivative proxy for directional or hedging needs. This addresses a significant market gap that institutional and retail traders have long requested.

Market Pulse: Activity you can reference

As of October 28, 2025 (intraday, MX quotes):

• U (SPUT) — Open interest: calls 6,334, puts 3,553; day volume: calls 152, puts 133.
• PHYS — Open interest: calls 729, puts 415; day volume: calls 0, puts 30.
• PSLV — Open interest: calls 1,495, puts 278; day volume: calls 101, puts 1.

Note that these snapshots are intended to help gauge liquidity and positioning. Early listings can display wider bid-ask spreads. It is recommended to use limit orders and focus on the more active expirations.

Practical notes for trading

• Find the chain: On MX's Quotes page, select Options on CEFs and choose U, PHYS, or PSLV. The option symbols match the fund tickers, while the underlying shows the TSX symbol (U.UN for SPUT).

• Choose expiration intentionally: Weekly and monthly expirations for these CEF options allow investors to plan timing around events such as macro prints or metal price moves.

• Note the premium/discount: Options pricing reflects the traded price, not the NAV. When implementing put-writing or covered-call strategies, consider where the CEF trades relative to the NAV to avoid buying when the CEF is at a large premium to NAV or selling calls when a discount to NAV might narrow.
• Know what you want to buy: If your trading thesis is based on owning metal (not miners), confirm each trust's physical-asset mandate before exploring options around it.

Strategy examples (For illustrative purposes only)

• PHYS covered call: Long PHYS units; sell a 4- to 8-week OTM call to collect premium while targeting a measured upside exit. If gold rallies sharply, you may be assigned, which is acceptable if you pre-defined a take-profit level.

• PSLV protective put: Buy a 1- to 2-month at-the-money (ATM)/near-ATM put ahead of key macro events. If silver trades sideways, time decay is the cost of protection. But if it drops, the put buffers any losses.

• U cash‑secured put: Sell a put at a strike where you are comfortable owning SPUT (considering any discount to NAV). You will either collect the premium or buy the units at your target effective price if assigned.

Conclusion

Options on U, PHYS, and PSLV provide self-directed traders and investors with familiar strategies, notably income, risk control, and tactical exposure on vehicles that hold physical commodities. With weekly expiries and penny increments, these contracts fit naturally into advanced retail workflows: research the CEF (including NAV dynamics), pick a risk‑defined options structure, and execute with discipline.

Options may not be suitable for all investors and involve substantial risk. The figures above are for illustrative purposes only and reflect intraday MX data from October 28, 2025; always check live quotes and disclosures before trading.